Definition of Irrational Exuberance

The term "irrational exuberance" was used by former Fed chairman Alan Greenspan in a speech at the American Enterprise Institute in December of 1996.

The phrase stood out like a sore thumb in an otherwise unremarkable speech about the economy and stock market, and many traders and financial pundits seized on the comment, sending markets lower worldwide.

The markets shrugged off the comments however, and quickly resumed their dizzying ascent to soaring heights.

The Nasdaq, which was at about 1,300 at the time of Greenspan's comments, would eventually QUADRUPLE over the next 3 1/2 years. Now that is "irrational exuberance".

This phrase will forever be associated with Alan Greenspan, who presided over two of the biggest asset bubbles in the history of the world (the dot-com bubble in the late 90's and the US real estate bubble from 2001-2005).

Taken from the site Irrationalexuberance.com, the term is meant to mean "a heightened state of speculative fervor" or a "speculative mania".